【教學課件】貨幣金融學7版英文課件-13-大學課件

【教學課件】貨幣金融學7版英文課件--13-大學課件HedgingHedge:

engageinafinancialtransactionthatreducesoreliminatesriskBasichedgingprinciple: Hedgingriskinvolvesengaginginafinancialtransactionthatoffsetsalongpositionbytakingashortposition,oroffsetsashortpositionbytakingaadditionallongposition2BuyingandWritingCallsAcalloptionisanoptionthatgivestheownertheright(butnottheobligation)tobuyanassetataprespecifiedexercise(orstriking)pricewithinaspecifiedperiodoftime.Sinceacallrepresentsanoptiontobuy,thepurchaseofacallisundertakenifthepriceoftheunderlyingassetisexpectedtogoup.Thebuyerofacallissaidtobelonginacallandthewriterissaidtobeshortinacall.Thebuyerofacallwillhavetopayapremium(calledcallpremium)inordertogetthewritertosignthecontractandassumetherisk.3ThePayofffromBuyingaCall

Tounderstandcalls,let'sassumethatyouholdaEuropeancallonanassetwithanexercisepriceofXandacallpremiumofα.Ifattheexpirationdate,thepriceoftheunderlyingasset,S,islessthanX,thecallwillnotbeexercised,resultinginalossofthepremium.AtapriceaboveX,thecallwillbeexercised.Inparticular,atapricebetweenXandX+α,thegainwouldbeinsufficienttocoverthecostofthepremium,whileatapriceaboveX+αthecallwillyieldanetprofit.Infact,atapriceaboveX+α,each$1riseinthepriceoftheassetwillcausetheprofitofthecalloptiontoincreaseby$1.4ThePayofffromWritingaCall

Thepayofffunctionfromwritingthecalloptionisthemirrorimageofthepayofffunctionfrombuyingthecall. Notethatthewriterofthecallreceivesthecallpremium,α,upfrontandmuststandreadytoselltheunderlyingassettothebuyerofthecallattheexerciseprice,X,ifthebuyerexercisestheoptiontobuy.5SummaryandGeneralization

Ingeneral,thevalueofacalloption,C,atexpirationwithassetpriceS(atthattime)andexercisepriceXis C=max(0,S-X) Inotherwords,thevalueofacalloptionatmaturityisS-X,orzero,whicheverisgreater.IfS>X,thecallissaidtobeinthemoney,andtheownerwillexerciseitforanetprofitofC-α.IfS<X,thecallissaidtobeoutofthemoneyandwillexpireworthless.AcallwithS=Xissaidtobeatthemoney(ortradingatpar).6BuyingandWritingPuts

Asecondtypeofoptioncontractistheputoption.Itgivestheownertheright(butnottheobligation)tosellanassettotheoptionwriterataprespecifiedexerciseprice.Asaputrepresentsanoptiontosellratherthanbuy,itisworthbuyingaputwhenthepriceoftheunderlyingassetisexpectedtofall.Aswithcalls,theownerofaputissaidtobelonginaputandthewriterofaputissaidtobeshortinaput.Also,aswithcalls,thebuyerofaputoptionwillhavetopayapremium(calledtheputpremium)inordertogetthewritertosignthecontractandassumetherisk.7ThePayofffromBuyingaPut

ConsideraputwithanexercisepriceofXandapremiumofβ.AtapriceofXorhigher,theputwillnotbeexercised,resultinginalossofthepremium.AtapricebelowX-β,theputwillyieldanetprofit.Infact,betweenX-βandX,theputwillbeexercised,butthegainisinsufficienttocoverthecostofthepremium.8ThePayofffromWritingaPut

Thepayofffunctionfromwritingaputisthemirrorimageofthatfrombuyingaput. Aswithwritingacall,thewriterofaputreceivestheputpremium,β,upfrontandmustselltheassetunderlyingtheoptionifthebuyeroftheputexercisestheoptiontosell.9SummaryandGeneralization

Ingeneral,thevalueofaputoption,P,attheexpirationdatewithexercisepriceXandassetpriceS(atthattime)is

P=max(X-S,0) Thatis,thevalueofaputatmaturityisthedifferencebetweentheexercisepriceoftheoptionandthepriceoftheassetunderlyingtheoption,X-S,orzero,whicheverisgreater.IfS>X,theputissaidtobeoutofthemoneyandwillexpireworthless.IfS<X,theputissaidtobeinthemoneyandtheowner willexerciseitforanetprofitofP-β.IfS=X,theputissaidtobeatthemoney.10FactorsAffectingPremium1. Higherstrikeprice

lowerpremiumoncalloptionsandhigherpremiumonputoptionsGreatertermtoexpiration

higherpremiumsforbothcallandputoptions3. Greaterpricevolatilityofunderlyinginstrument

higherpremiumsforbothcallandputoptions11Spot,Forward,andFuturesContractsAspotcontractisanagreement(attime0)whentheselleragreestodeliveranassetandthebuyeragreestopayfortheassetimmediately(now)Aforwardcontractisanagreement(attime0)betweenabuyerandasellerthatanassetwillbeexchangedforcashatsomelaterdateatapriceagreeduponnowAfuturescontractissimilartoaforwardcontractandisnormallyarrangedthroughanorganizedexchange(i.e.,ME,CBT) Themaindifferencebetweenafuturesandaforwardcontractisthatthepriceofaforwardcontractisfixedoverthelifeofthecontract,whereasfuturescontractsaremarked-to-marketdaily.12FinancialFuturesMarketsFinancialfuturesareclassifiedas

Interest-ratefuturesStockindexfutures,andCurrencyfutures

InCanada,financialfuturesaretradedintheMontrealExchange(seeTable13-1)13Interest-RateForwardMarketsLongposition=agreetobuysecuritiesatfuturedateHedgesbylockinginfutureinterestrateiffundscominginfutureShortposition=agreetosellsecuritiesatfuturedateHedgesbyreducingpriceriskfromchangeininterestratesifholdingbondsPros1. Flexible(canbeusedtohedgecompletelytheinterestraterisk)Cons1. Lackofliquidity:hardtofindacounterpartytomakeacontractwith2. Subjecttodefaultrisk:requiresinformationtoscreengoodfrombadrisk14WidelyTradedInterest-Rate

FuturesContracts15InterestRateFuturesMarketsInterestRateFuturesContract1. Specifiesdeliveryoftypeofsecurityatfuturedate2. Arbitrage

atexpirationdate,priceofcontract=priceoftheunderlyingassetdelivered3. i

,longcontracthasloss,shortcontracthasprofit4. Hedgingsimilartoforwards Microvs.macrohedgeTradedonExchanges:

Globalcompetition

SuccessofFuturesOverForwards1. Futuresmoreliquid:standardized,canbetradedagain,deliveryofrangeofsecurities2. Deliveryofrangeofsecuritiespreventscorner3. Marktomarket:avoidsdefaultrisk4. Don’thavetodeliver:netting16WidelyTradedStockIndexFuturesContracts17WidelyTradedCurrencyFutures18ProfitsandLosses:Optionsvs.Futures$100,000Canada-bondcontract,1.Exercisepriceof115,$115,000.2.Premium=$2,000?2005PearsonEducationCanadaInc.19PayoffFunctionfromBuyinganInterestRateFutures(seeFig.13-1)

ConsidertheJuneCanadabondfuturescontracttradedontheME.Ifyoubuythiscontractfor115,youagreetopay$115,000for$100,000facevalueoflong-termCanadaswhentheyaredeliveredtoyouattheendofJune.IfattheexpirationdatetheunderlyingCanadabondforthefuturescontracthasapriceof110,meaningthatthepriceofthefuturescontractalsofallsto110,yousufferalossof5points,or$5,000(pointA')115,youwouldhaveazeroprofit(pointB')120,youwouldhaveaprofitonthecontractof5points,or$5,000(pointC')20PayoffFunctionfromSellinganInterestRateFutures(seeFig.13-1)

Ifyousellthiscontractfor115,youagreetodeliver$100,000facevalueoflong-termCanadabondsfor$115,000attheendofJune.IfattheexpirationdatetheunderlyingCanadabondforthefuturescontracthasapriceof110,meaningthatthepriceofthefuturescontractalsofallsto110,yougain5points,or$5,000(pointA')115,youwouldhaveazeroprofit(pointB')120,youwouldhavealossonthecontractof5points,or$5,000(pointC')21Figure13-1.

InterestRateFuturesOptions

AnoptioncontractontheME'sJuneCanadabondfuturescontracthasthefollowingkeyfeatures:ithasthesameexpirationdateastheunderlyingfuturescontractitisanAmericanoptionandsocanbeexercisedatanytimebeforetheexpirationdate,andthepremiumoftheoptionisquotedinpointsthatarethesameasinthefuturescontract,soeachpointcorrespondsto$1,000.22HowInterestRateFuturesOptionsWork(seeFig.13-1)

Supposethattodayyoubuy,fora$2,000premium,aEuropeancallonthe$100,000JuneCanadabondfuturescontractwithastrikepriceof115.IfattheexpirationdatetheunderlyingCanadabondforthefuturescontracthasapriceof110,thefuturescallwillbeoutofthemoney,sinceS<X.Itwillexpireworthlessforalossof$2,000(pointA)115,thefuturescallwillbeatthemoney,butproducesnogainorloss(pointB)120,thefuturescallwillbeinthemoneyandwillbeexercised.Youwouldbuythefuturescontractattheexercisepriceof115andthensellitfor120,therebyearninga5-pointgain($5,000profit)onthe$100,000Canadabondcontract.Becauseyoupaida$2,000premium,however,thenetprofitis$3,000(pointC)23Figure13-1.TheDifferencebetweenInterestRateFuturesandInterestRateFuturesOptions

thefuturescontracthasalinearprofitfunction---thereisaone-to-onerelationshipbetweenprofitsandthepriceoftheunderlyingfinancialinstrumentthekinkedprofitcurvefortheoptioncontractisnonlinear,meaningthatprofitsdon'talwaysgrowbythesameamountforagivenchangeinthepriceoftheunderlyingfinancialinstrumentthereasonforthisnonlinearityisthatthecalloptionprotectsyoufromhavinglossesthataregreaterthantheamountofthe$2,000premiumoncethepriceoftheunderlyingfinancialinstrumentrisesaboveX,however,yourprofitsonthecalloptiongrowlinearly.Theyare,however,alwayslessthantheprofitsonthefuturescontractbyexactlythe$2,000premiumpaid.24CurrencyFutures

HedgingFXRiskExle:Customerdue€20millionintwomonths,current€=$0.501.Forwardagreeingtosell€20millionfor$10million,twomonthsinfuture2.Sell€20millionoffutures25CurrencySwaps Inacurrencyswaptwopartieseffectivelytradeassetsandliabilitiesdenominatedindifferentcurrencies. Thesimplestcurrencyswapisanagreementtosellacurrencynowatagivenpriceandthenrepurchaseitatastatedpriceonaspecifiedfuturedate.Thedifferencebetweenthetwopricesiscalledtheswaprate.Exle: AGermanbankmightswap€for$withaCanadianbankbyagreeingtosell€1millionatapriceof€/$=€0.60andtorepurchase€1millionayearlateratapriceof€/$=€0.70. ThiscurrencyswapallowstheGermanbanktoborrow$andtheCanadianbanktoborrow€.26(Continued) Oftencurrencyswapsaretiedtodebtissues.Inparticular,twopartiesissuedebtdenominatedindifferentcurrenciesandthenagreetoswaptheproceedsofthedebtissueandtorepayeachother'sdebts--effectivelytransformingeachdebtintotheothercurrency.Exle: ACanadiancompanywantstoborrow€10million.Thecompany,however,believesthatitcangetbettertermsifitissues$-denominatedbondsinCanadawhereitiswellknown,andthenswapthe$for€withaGermancompanythatwantstoborrow$butforthesamereasonsfindsiteasiertoborrow€inEurope---seenextslide.27CurrencySwapContract

28UsingCurrencySwapstoManageExchangeRateRiskFirstBankAssets Liabilities$-Denominated $188m $-Denominated $50m€-Denominated $12m €-Denominated $30m (€7.5m@$1.6/€) (€18.75m@$1.6/€) Networth $120m

29(Continued) Consideringthehypotheticalbalancesheetshowninthepreviousslide,ifthe$depreciatesrelativetothe€,€-denominatedassetsandliabilitieswillbeworthmore$. Becausethebankhasmore€-denominatedliabilitiesthan€-denominatedassets,itwillsufferlosses. Forexle,ifthe$/€exchangerateincreasesto$1.7,thenthebankwillhaveacapitallossof$1.05m,ascanbeseeninthefollowingslide:30(Continued)FirstBankAssets Liabilities$-Denominated $188m $-Denominated $50m€-Denominated 12.75m €-Denominated $31.8m (€7.5m@$1.7/€) (€18.75m@$1.7/€) Networth $118.95 Total $200.75 Total $200.7531(Continued) Toreduceitsexposuretothe$/€exchangeraterisk,thebankcouldswap$18millionofits€-denominatedliabilitiesfor$-denominatedliabilities. Thiswouldleavethebankwith$12millionin€-denominatedliabilities,whichmatchesits$12millionof€-denominatedassets. With€-denominatedassets=€-denominatedliabilities,achangein$/€exchangeratedoesnotchangethebank’snetworth.32InterestRateSwaps Inaninterest-rateswap,twounrelatedpartiestakeoutloans.Thentheyagreetomakeeachother’speriodicinterestpayments. Thetwopartiesdonotexchangetheirdebtsorlendeachothermoney,butsimpl